Flood cover in home insurance
Don’t get caught out during storm season. Compare home and contents insurance policies in just minutes.
Flood cover explained by David Koch
Kochie discusses flood cover and shares top tips for protecting your home and possessions.
David Koch
Video Transcript
We work so hard for our homes. It makes sense to protect them in every way we can! Screen doors and security cameras have become popular options – but when natural disasters like floods are a threat, what defence do we have? That’s where flood cover comes in.
When you have flood cover on your home and contents policy, you get the peace of mind that no matter what happens, your home and personal belongings could be covered for flood damage. However, some things are irreplaceable and prevention is often better than cure. So here are Compare the Market’s top tips on protecting your home and belongings for storm and flood damage. It all starts with the purchase of your home.
Before you sign the papers, check the local flood maps to see if the property is in a high-risk area. If it is, you could consider a proper building inspection to know how it’s held up in the past. Next, it’s crucial to keep on top of maintenance. Things like cleaning out your gutters and keeping your roof up to scratch make a big difference.
And when a storm is about to hit, keep an eye out for warnings, visit your local sandbag collection area, and keep an emergency kit on hand, just in case. Most importantly, make sure you have adequate cover well before disaster strikes. Insurers can put embargos in place that could prevent you from purchasing insurance if your area is at risk, so get insured before it’s too late. With Compare the Market, you can review a range of options side-by-side and look for important inclusions, like flood cover.
It always pays to compare so start your journey today, with Compare the Market.
What is considered a flood for insurance?
For insurance purposes, a flood occurs when water from a lake, river, creek, reservoir, canal or dam, or other natural watercourse covers normally dry land.
It’s important to note that flooding is different from storm damage or rainwater runoff, which occurs when heavy rainfall flows across normally dry ground, provided such rainwater is not combined with flood waters.
Flood cover typically offers financial protection for flooding that occurs from:
- lakes
- rivers
- creeks
- reservoirs
- canals
- dams.
Depending on your insurer and policy, rainwater runoff may be covered under storm cover rather than flood cover. Though some insurers won’t cover rainwater runoff when the customer chooses not to take flood cover.
To understand exactly how your insurer defines a flood and what is covered, read the relevant Product Disclosure Statement (PDS). Different insurers may apply different cover conditions, exclusions and benefits.
How do I know if I live in a flood zone?
You can find out if your property is in a flood zone by checking flood maps provided by your local council or state government. These maps can help identify risks from river, creek, storm tide, flash flooding and overland flow flooding and may also provide information about the likelihood and type of flooding that could affect your property.
Councils generally define flood risk using Annual Exceedance Probability (AEP), which describes the likelihood of a flood occurring in any given year. For example, a property with a 1% AEP has a 1-in-100 or 1% chance of a flood reaching a specific level in the given year. And that chance resets every year.
Depending on where you live, the following could help you find out if your property is at risk of flooding:
- NSW: NSW Flood Data Portal
- Vic: Victoria State Emergency Service
- Qld: FloodCheck Queensland
- SA: South Australian State Emergency Service
- WA: Government of Western Australia
- Tas: Tas State Emergency Service
- ACT: ACT Government
- NT: Northern Territory Government
Checking your property’s flood risk is important, particularly as flooding affects many properties across Australia. According to the Insurance Council of Australia, an estimated 1.36 million properties face some level of flood risk. Of those, around 298,000 properties, including more than 220,000 homes, have a 2% to 5% annual chance of flooding.
How much does home insurance with flood cover cost?
According to the Insurance Council of Australia, homeowners in flood-prone areas can face flood insurance costs of more than $7,000 a year, with premiums exceeding $30,000 for some properties in the highest-risk locations. The amount you’ll pay for home and contents insurance with flood cover is generally determined by the risk of flooding or water damage at your property, and the cost of repairing and rebuilding after a flood. As a result, your location could have a significant impact on your premiums.
Some other factors that may influence how much you pay for home insurance premiums include:
- The type of cover you purchase.
- Any optional extras you add to your policy, such as loss of rent and temporary accommodation and removal of debris.
- The age of your home.
- Property-specific information such as floor levels and construction type.
- High repair and rebuilding costs following floods.
The excess amount on your policy could also impact your premiums. For example, opting for a higher excess on your cover could lower your premiums and vice versa. Before increasing your excess, ensure it’s an amount you can afford to pay if you need to make a claim.
How do flood cover claims work?
Flood insurance claims work like other home building insurance claims. After you lodge your claim, your insurer will contact you and may send a representative to assess the damage. If your claim is successful, you’ll receive a settlement from your insurance company. Your insurer may repair, rebuild or replace the damaged property, or provide a cash settlement up to your policy limits. The amount you receive will depend on your level of cover, your sum insured and any applicable excess.
If your claim was unsuccessful or you disagree with the settlement outcome, you can dispute this first with your insurer’s complaints resolution process and, then, if you are still unhappy with the outcome, through the Australian Financial Complaints Authority (AFCA) if necessary.
Is flooding covered by home insurance?
Some insurers offer flood cover as a standard inclusion in home insurance policies, but others may offer it as an optional extra. You can find out if a policy has flood cover and other benefits by reading the PDS.
Does my property require flood insurance?
There’s generally no legal requirement for you to have flood cover or even a home insurance policy in general. However, if you’re getting a home loan, such as when buying a home or refinancing, most lenders will require you to take out home insurance. Your lender may also ask for proof of insurance, such as a Certificate of Currency, before finalising your home loan.
How can I find out whether I’m covered for a flood?
If you already have home insurance, you can find out if you’re covered for floods by reading the PDS of your current policy or contacting your insurer.
When should I get flood cover?
If you’re considering flood cover, it may be beneficial to consider adding it to your policy as soon as possible, as many insurers generally have a 48 to 72-hour waiting period. During weather events, insurers usually put embargoes on home insurance policies to ensure people aren’t just buying cover to immediately claim on it. This means you might not be able to purchase cover for a certain period before and after an insured event like a flood, bushfire or cyclone.
By purchasing cover sooner rather than later, you could avoid a potential embargo when the next flood event happens.
Can renters and tenants get flood insurance?
Tenants can purchase contents insurance with flood cover to safeguard the items in their home. However, cover for the home building is the responsibility of the landlord.
Can you get flood insurance in a flood zone?
Properties in flood zones typically can’t get insurance easily or may even be denied cover altogether. If cover is available, premiums are often much higher and coverage may be more restricted.
If you live in a flood-prone area, consider comparing your options to see what might be available for your home. Flood risk can also affect a property’s value and may influence a lender’s decision when assessing a home loan application. In some cases, lenders may also consider flood risk when assessing a property’s suitability as security for a mortgage.
Before buying home insurance, compare your options carefully and read the relevant Product Disclosure Statement (PDS) to understand what’s covered and excluded.
What’s the best insurance for flood risk areas?
There is no single best home insurance provider for flood-risk areas. Insurers assess flood risk differently, and premiums, cover limits and exclusions can vary based on your property’s location, flood history and individual risk profile.
When comparing home insurance for a flood-prone property, consider:
- Whether flood cover is included as a standard benefit or optional extra.
- Any exclusions, limits or waiting periods that may apply.
- The excess payable if you make a flood claim.
- The overall cost of the policy, including the flood component of the premium.
Whether you’re concerned about seasonal storms or the risk of major flooding, flood cover could help protect your home and belongings from unexpected damage. You can start comparing a range of home insurance policies, including options with flood cover, through Compare the Market today.
Why are some flood claims denied?
Flood claims may be denied if the policy doesn’t cover the damage or if another cause is determined to be responsible for the loss. According to the Insurance Council of Australia, most insurance claims (96%) get accepted, but claims may be declined if they fall outside the policy’s terms and conditions.
Common reasons flood claims may get rejected include:
- Flood damage is excluded under the policy. This may include situations where floodwater and stormwater are mixed and floodwater is determined to be the main cause of the damage.
- Another event, such as storm surge, land movement or subsidence, is considered the main cause of the loss.
- The policy has lapsed, been cancelled or premiums haven’t been paid.
- The property hasn’t been properly maintained, increasing the risk or extent of damage.
- Important information that could affect the insurer’s assessment of risk wasn’t disclosed when the policy was purchased or renewed.
What isn't usually covered by flood insurance?
Flood cover doesn’t automatically cover every type of water-related damage. Depending on the insurer and policy, flood cover may exclude damage caused by:
- Actions of the sea, such as tsunamis, high tides, sea level rise and coastal flooding.
- Water that entered the property during renovations or construction work.
- Underground water seepage or pressure.
- Hydrostatic pressure.
- Soil movement that doesn’t occur immediately after a flood or rainwater runoff event.
Please note that this is just a guide. To find out more about what your home insurance policy covers, always read the PDS. The Target Market Determination (TMD) could also help you figure out if the policy is right for your circumstances.
Meet our home and contents insurance expert, Adrian Taylor
As a General Insurance expert with over 13 years’ experience in financial services, Adrian Taylor works to make it easier for homeowners, renters and landlords to protect their home and contents. He believes it’s important for all residents (whether they rent, own or lease) to have adequate financial cover for their property and belongings in case the worse should happen.